Sunoco 2008 Annual Report Download - page 24

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merchant coke market is largely supplied by Chinese producers. Sunoco believes it is well-positioned to compete
with other coke producers since its proven proprietary technology allows Sunoco to construct coke plants that,
when compared to other proven technologies, produce virtually no hazardous air pollutants, produce consistently
high quality coke, produce ratable quantities of steam that can be utilized as industrial grade steam or converted
into electrical power, require significantly fewer workers to operate and are more economical to maintain.
Research and Development
Sunoco’s research and development activities are currently focused on applied research, process and product
development, and engineering and technical services related to chemicals. Sunoco spent $10, $11 and $12
million on research and development activities in 2008, 2007 and 2006, respectively.
Employees
As of December 31, 2008, Sunoco had approximately 13,700 employees compared to approximately 14,200
employees as of December 31, 2007. Approximately 4,900 of Sunoco’s employees as of December 31, 2008
were employed in Company-operated convenience stores and service stations and in the Company’s heating
products business. Approximately 20 percent of Sunoco’s employees were covered by 45 collective bargaining
agreements as of December 31, 2008 with various terms and dates of expiration. In February 2009, the Company
reached an agreement on a three-year contract with the hourly workers at its Toledo refinery. Negotiations
continue at the Marcus Hook and Philadelphia refineries and management is hopeful that agreement will be
reached prior to expiration of the contracts on March 1, 2009. In the event that represented employees at Marcus
Hook and/or Philadelphia elect to strike, management is fully prepared to operate the facilities with staff
employees and does not anticipate any material adverse impact to cash flow or earnings as a result.
Environmental Matters
Sunoco is subject to extensive and frequently changing federal, state and local laws and regulations,
including, but not limited to, those relating to the discharge of materials into the environment or that otherwise
relate to the protection of the environment, waste management and the characteristics and composition of fuels.
As with the industry generally, compliance with existing and anticipated laws and regulations increases the
overall cost of operating Sunoco’s businesses. These laws and regulations have required, and are expected to
continue to require, Sunoco to make significant expenditures of both a capital and an expense nature. For
additional information regarding Sunoco’s environmental matters, see “Environmental Matters” in
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7).
ITEM 1A. RISK FACTORS
In addition to the other information included in this Form 10-K, the following risk factors should be
considered in evaluating our business and future prospects. These risk factors represent what we believe to be the
known material risk factors with respect to us and our business. Our business, operating results, cash flows and
financial condition are subject to these risks and uncertainties, any of which could cause actual results to vary
materially from recent results or from anticipated future results.
Volatility in refined product and chemicals margins could materially affect our business and operating results.
Our profitability depends to a large extent upon the relationship between the price we pay for crude oil and
other feedstocks, and the wholesale prices at which we sell our refined products and chemicals. The volatility of
prices for crude oil and other feedstocks, refined products and chemicals, and the overall balance of supply and
demand for these commodities, could have a significant impact on this relationship. Retail marketing margins
also have been volatile, and vary with wholesale prices, the level of economic activity in our marketing areas and
as a result of various logistical factors. In many cases, it is very difficult to increase refined product and chemical
prices quickly enough to recover increases in the costs of products being sold. We may experience significant
changes in our results of operations also due to planned or announced additions to refining capacity by our
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